06 Sep 2012

Maximising Lifetime Value

Lifetime ValueThis concept is quite simple; it is the expected sum of all gross profits contributed to a business by a client over their entire client lifetime. To accurately forecast this, you need to know how much profit you will extract in a given month and how long the client is expected to stay as a customer. Let me just focus on the latter in this blog.The concept of survivalAt any point in time, clients can experience events that either make them like a company more or like them less. This directly impacts on the likelihood of the client staying with a company in the future, and can be quantified by allocating a probability of survival from month to month – simply a number between 0 and 1 with 1 meaning that they will stay without a doubt. Sounds like a no brainer, right? Some of the largest organisations in the world invest heavily to forecast what this ‘survival curve’ looks like for their clients, using highly advanced statistical models that take a wide array of real-time transactions and interaction inputs. These models are living things, constantly correlating and updating (often hourly) to give businesses guidance and alerts of possible client dissatisfaction, up-sell opportunities and other contact actions.Maximising lifetime valueThis is what we at Brennan IT are solving for when managing our practice. Keeping our clients satisfied and effectively positioning relevant products to them will maximise lifetime value. Our client’s loyalty can often lead to advocacy of our business to their industry peers which then generates leads and further fuels growth.
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